Low milk prices, glutted market put strain on dairy farmers

WEST CHARLTON, N.Y. (AP) — In an online profile of "Our Farmers," New York City milk bottler Elmhurst Dairy tells the story of how David Wood bought his first two calves as a part-time hobby in 1970 and grew his Saratoga County farm to more than a thousand Holsteins, whose milk is trucked every day to its plant in Queens.

At least, it used to be.

Elmhurst abruptly cut ties with Wood's seven-farmer Mohawk Valley Cooperative and another small co-op in central New York in March, giving them 30 days to find new buyers for their milk. It couldn't have happened at a worse time, with a nationwide glut of milk and plummeting prices.

"A lot of people are scrambling to get all their milk sold," said Wood, who for 13 years sent milk to Elmhurst from Eildon Tweed Farm, which was founded by his wife's Scottish ancestors in 1794 in the Saratoga County town of West Charlton. "It's a very difficult market right now. It took a lot of work to find a market, but we now have short-term contracts with three buyers and have been selling all our milk for the past week."

This is shaping up as a challenging year for all U.S. dairy farmers, who enjoyed record high milk prices and low feed prices last year. An increase in milk production combined with sharply lower exports and declining sales of fresh milk have combined to depress milk prices paid to farmers from a 2014 high of about $28 per hundred pounds — about 9 gallons — to below $18 this spring.

Wood said he's currently selling milk for less than it costs him to produce it — around $20 per hundred pounds.

"This issue is affecting both large and small co-ops," said Joe Morrissey, a spokesman for the state Department of Agriculture and Markets. But small groups are finding fewer outlets for their milk than they had in the past.

Wood's small cooperative is something more typical in the Northeast than elsewhere, said Andrew Novakovic, a professor of agricultural economics at Cornell University and a part-time U.S. Department of Agriculture economist. Most milk is marketed through large national or regional cooperatives, but in the Northeast, small groups of farmers have been able to negotiate premium prices by guaranteeing a processor one to three 75,000-gallon tankers a day of high-quality milk.

"That has started to change as milk volume has gone up and people aren't drinking as much milk as they used to, especially in the Northeast," Novakovic said. "Elmhurst and some other processors can't afford to take excess milk. They've found an alternative supplier that would sell them just what they need, so they no longer need a dedicated supply from these small cooperatives."

Elmhurst didn't return a call seeking comment.

Farmers in small co-ops could join a large group so they don't have to scramble for buyers. But some of those groups, like Upstate Niagara in western New York and Agri-Mark, which operates dairy plants in Vermont, Massachusetts and New York, aren't taking new members because they have all the milk they can handle.

"For a lot of small bargaining units, it's a big leap to go from 10 guys to a 15,000-member organization," Novakovic said.

Karl Rauscher's 75-cow dairy in West Leyden is part of the 13-member Oneida-Lewis Milk Producers Cooperative in central New York, which also lost its contract with Elmhurst in mid-April. The group has been selling milk to processors on the spot market while searching for another long-term contract. Rauscher said an affiliation with a national cooperative would lift the burden of scrambling for contracts, but many farmers prefer the independence of a small group that puts the farmer's interest first.

"We'd like to keep our small group together and market it ourselves," Rauscher said. "It's going to be real tough. There's never been anything like this in the past."

Dairy Farmers of America, which merged with Syracuse-based Dairylea last year, asked some of its Northeast members to dump their milk during the winter holidays when processors were shut down, and last fall started charging its members 50 cents per hundred pounds to account for additional transportation costs and low prices.

Expansion in the Greek yogurt business in New York has been a boon to the dairy industry, but has also added to the milk surplus because many farmers expanded their herds and produced more milk than the yogurt plants needed, Wood said.

New York, the nation's No. 3 milk producer behind California and Wisconsin, produced 13.7 billion pounds of milk in 2014, an increase of 2 percent over 2013, Morrissey said. From 2009 to 2013, the amount of New York milk used to make yogurt increased from 366 million pounds to 1.8 billion pounds, he said.

Wood sees reasons to be optimistic. Spring planting is going well and feed prices are reasonable. "Hopefully, production will drop back. It's moving in the right direction," Wood said. "The prediction is for a higher milk price in the fall."